Tax Evasion

This blog provides an alternative approach, described as a potential abusive tax avoidance (PATA), to evaluate incidences of illicit financial flows (IFFs) in Africa. By way of a working definition, PATA arises when there is a greater probability that a proposed tax legislation is susceptible to abusive tax avoidance. The abuse contemplated under the PATA is similar to Steve Dean’s argument of how considerable degree of taxpayer autonomy– under the guise of tax deregulation - can negatively impact a nation’s tax system. PATA provides a complimentary mechanism to examine how a proposed international tax framework can result into IFFs. The author undertakes this analysis using the global minimum tax proposed by the OECD to address the tax consequences of the digitalized economy.

Focusing on limiting IFF is a much better option for providing African countries with the necessary funds towards achieving Agenda 2063 and the United Nations Sustainable Development Goals. Realizing tax revenue from reducing IFFs may also reduce dependence on foreign aid. As African countries take the required steps to curb IFF, it is relevant to note that no single country can independently curb Illicit financial flows, especially from aggressive tax planning. Increasing financial transparency through consistent domestic policy implementation and international cooperation remains one of the most efficient channels to halt IFFs out of Africa.

There is no gainsaying the fact that Illicit Financial Flows (IFFs) constitute a major impediment to Africa’s sustainable development. In fact, IFFs have a direct impact on a country’s ability to raise, retain and mobilise its own resources to finance sustainable development. Its negative impact further includes draining a country’s foreign exchange reserves, reducing domestic resource mobilization, preventing the flow of benefits of foreign direct investment, and worsening insecurity, poverty and economic inequality.

The News and Events category publishes the latest News and Events relating to International Economic Law relating to Africa and the Global South. Every week, Afronomicslaw.org receive the News and Events in their e-mail accounts. The News and Events published every week include conferences, major developments in the field of International Economic Law in Africa at the national, sub-regional and regional levels as well as relevant case law. News and Events with a Global South focus are also often included.

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This paper has adopted a precedential approach by illustrating the approaches used by some developing countries in selected but similar regions with West Africa in solving their tax collection problems. This paper has also recommended some pathways to be walked by West African countries in order to considerably succumb the gravid challenges faced in the collection of taxes and mobilization of revenues. By adopting the recommended techniques, the immense efforts made by the governments of these countries in addressing the practical challenges facing their tax revenue collection can be duly compensated.

December 9, 2020

This blog reflects on an issue as current and complex as the control of the digital economy by the Tax Administrations (TAs). The topic is very important in Latin America and Caribbean because it is the most unequal region in the world with extreme poverty. The prevalence of informal economy in Latin America and Caribbean requires that controling the digital economy and combating tax evasion be a priority for the region.

Digital Economy and Taxation in Latin America

The COVID19 pandemic has shown that, while physical presence-based commerce was suffering the consequences of social isolation, with many businesses going into bankruptcy, the e-commerce increased. With millions of new customers - lots of those who had never bought anything on the internet before - the sector experienced unprecedented growth, despite the Pandemic, despite the crisis.

Adopting an electronic version of the euro and granting it the legal tender status would certainly allow States to adopt more stringent policies for fighting AML and tax evasion. Even though most of the references and examples in this contribution were focusing on the EU context, similar conclusions can be drawn for other parts of the world. While new technologies such as a CBDC could represent an additional tool at disposal of tax authorities to fight tax evasion and fraud, issues concerning the digital divide and privacy shall be addressed while the debate over the design of a CBDC is still ongoing.

Developed and developing countries have committed to implement global standards as developed by the OECD with the political mandate of the G20 including standards that provide for exchange of information among tax administrations. Some of  the reasons for this exchange to take place, is the need to provide tax administrations with the relevant information on taxpayer’s activities/assets abroad, as well as to ensure that taxpayers including multinationals pay their fair share of taxation. Exchange of information is the key instrument for tax administrations in order to prevent tax evasion, tax fraud, and aggressive tax planning.